Readers will be aware of the conflicting authorities on the effect of directors omitting to give notice of their intention to appoint administrators to the company or any of the other persons listed at rule 2.20 of the Insolvency Rules 1986.
In Hill v Stokes (2010) and Virtual Purple Professional Services Ltd (2011), it was held that an appointment of administrators was not rendered invalid when directors failed to give notice of their intention to appoint to the company or to landlords who were distraining. However, in Minmar (2011) and Msaada Group (2011), the courts decided that failure to give notice to the company or the supervisor of a voluntary arrangement meant that the subsequent appointment of administrators was invalid.
The case of BXL Services brings some welcome clarity to these recent conflicting decisions. Mr Justice Purle QC decided that failure by directors to give notice of an intended appointment of administrators to the company did not invalidate the appointment. He followed the approach of the court in Re Ceart Risk Services (2012), where both Virtual Purple and Msaada were fully considered and the approach of Virtual Purple preferred.
While this area of the law is now settled at first instance, the Court of Appeal could reverse the ruling in BXL Services if a subsequent case is argued before it. Directors should therefore if at all possible, continue to serve the company and the other prescribed persons with notice of their intention to appoint administrators.
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